No-one is infallible

Last week was published the book by M. Batnicka named Big Mistakes: The Best Investors and Their Worst Investments. It has instantly become a topic for many blogs, tweets, and so on.

What it is about?

I will return to the book several times, I will bring the most interesting insights from individual investors. Today I have prepared a brief summary of its basic elements. The most important thing is that even the greatest investors have made big mistakes. However, they have treated them differently than most people do. Majority of us attribute our successes to our genius and hard work, but we explain our failures by coincidence or bad circumstances. Investors presented in this book did not see their mistakes in this way, they blamed themselves for unsuccessful investments. They did not want to repeat the same mistakes, so they learned from them, thanks to this approach they devoted more time to studying their own bad investments than admiring their success.

They understood that what have worked recently might not work anymore and therefore they did not rely on it (one of such indicators is, for example, the P / B indicator, which was considered one of the key indicators in the last century, but nowadays it is influenced by a number of previously negligible or even non-existent factors and has therefore lost its privileged position).

Man as an emotional creature

Another factor is switching between time horizons. This means that the investor can´t leave the investment without touching it even if it still meets its criteria, only its price (share price) has fallen. In the beginning, the investment has been evaluated based on long-term investment criteria but with time it is evaluated based on the short term. Few resists doing nothing more than a year. When doing so, emotions are let into the investment.

Nobody is infallible and learning from mistakes is one of the best tools for achieving better results. Therefore, As I mentioned at the beginning, I will gradually publish interesting insights from the book. I hope you have something to look forward to. 😊